Are the banks supporting small businesses?

We are constantly bombarded with “facts” regarding business confidence up/down, lending up/down, interest rates to go up/down etc etc etc. The UK finance industry is one of the worst offenders to this and I constantly receive e mails and newsletters saying things like “we are lending more than last year” “there is no demand for small business loans” and stuff such as 85% of applications are approved.

Unfortunately these statements “hide” some truths.

1. Let’s say you owe your bank £100,000 on a loan and want to increase this by £10,000. They will probably say something like (If they want to lend) “Why don’t we roll up the loans into one easy to handle transaction?” If you agree then they have lent you £110,000 not £10,000 (and are therefore “lending more than we did last year”!)

2. If you go to your local manager with an application he or she will then look and see if it has any chance of succeeding. If they think it has legs then they will do all they can to get the application approved. Normally alot of time and effort goes into this process by both parties. It then goes to the mystical “underwriters” in their cave somewhere. They then reject say 15% of applications because they don’t want to take a perceived risk or they think the application is no good. So instead of saying hey we reject loads of applications from our own managers who really believe in their client’s dreams/wishes we accept 85%. Sound better?

The thought of Vince Cable and his cronies getting involved in all this fills me with dread and fear.

Perhaps we could someday go back to a system whereby the bank manager was a local person, who knew and understood his clients and would lend to some and not to others but was led by his skill gained in 30 years or so of “local banking”. The computer never had a chance with small businesses! And still shouldn’t.

It seemed to work for 200 years.

I’ll put my tin hat on.

Look after your credit score!

If you are looking to borrow funds for your business it is more important than ever before that you look after your credit score.

In the “old days” ie last week lenders would look at all aspects of a “deal” that was being proposed to them attaching different “weights” to each aspect of the proposal. For example if you are looking to finance say a car then the finance company will attach value to that because if you don’t pay for it they can take it back and sell it on. If you were financing software that would have little or no value should you default.

Increasingly though finance companies will perform a credit search on (in small businesses) both the company and the director’s/proprietors. Often they will want 6 months business AND personal bank statements. If there are any missed payments or bounced direct debits/cheques in the last 6 months that will normally be the end of the application and it will go no further, no matter what you are looking to finance. Computer says no has never been truer.

So keep all your credit cards up to date, don’t let your bank account go over it’s limit.

the end of blogging?? not in commercial leasing!

I heard yesterday that blogs were no longer the thing. Well I suppose they have been about for over two years so in this day that’s an age I suppose.

In the world of finance that’s a shame because us types are only just catching up with this and now we have to twitter and Facebook stuff. Never mind.

Client’s appetite for “small” leasing contracts ie up to about £10,000 is as keen as ever. Unfortunately finance houses and banks  are mainly not keen on this market as it is expensive for them to administer and they don’t have robust systems in place should there be a hiccup. Their underwriting is also “balance sheet” based when at this level that is often only a part of the story.

There is a huge gap in the market and I will be giving details of a very exciting new development for small businesses in the new year. Watch this space!!

how to get finance from a bank

I see loads and loads of business plans, produced to try and get funding.

 Unfortunately most of them are totally unfocussed. A business plan should give the reader a clear understanding of what you are trying to achieve and how you are going to get there.

 You need to understand what lenders are looking for. A reason why they should give it to you, and how you plan to pay it back. Many forget the last bit.

A quick tip, the banks  and finance companies do have money, they sometimes want to lend it but YOU have to convince them that your business is the best and they would be foolish to turn it down.

Here’s a few do’s and dont’s (this is for small local businesses)

DONT’S

start babbling on about the number of consumer group A’s or B plusses etc etc  in the area

make unrealistic assumptions. Nearly every small business plan I see shows at least £250,000 in the bank at year 3!

talk tecno-babble, you’re dealing with bankers!

Claim there is no risk. Hello?

DO’s

show it to a real mate who will pick holes in it BEFORE anyone else sees it

Have a single page precis on what you want, why you deserve to have it, and what you are bringing to the table (money, security, guarantees etc) how great you are at what you do

There are plenty of online guides available and I have a few that I can pass on.

If you have a plan and want me to have a quick look I will act teacher!

UK tourism has a great future!

I went to a talk by our local MP John Penrose last night, who also happens to be our new Minister Of Tourism. He is a great enthusiastic speaker and the discussion was very interesting.

Coming from and representing a seaside town that is facing all sorts of challenges, he recognises that we all have to think differently in attracting tourism, both from abroad and the UK.

The fact that UK PLC has no money makes the job doubly challenging! But I am confident that if John gets the support he deserves he CAN make a difference to the tourism industry and also the UK.

I just wish that some bankers would like to re-join society and invest in quality local businesses to see us all benefit from the wonderful resources this country has!

no change in lending attitudes for most UK based lenders

It’s an unfortunate but true situation that small businesses are being squeezed by their lenders. The lenders are getting tighter and tighter with their criteria and basically don’t want to take any risk. I am constantly being told that there is plenty of money to be lent. Unfortunately there are too many scenarios that are not deemed suitable for the banks and finance companies. Clients often approach me after they have made approaches and been rejected.

It seems that many can’t “tick the boxes” but don’t know which boxes the lenders are looking at. You often only get one chance at borrowing money on the terms that you want. Don’t take the risk and get a professional on your side who knows how these people work and what they are looking for.

let’s get out there and buy stuff!!

The business community seems to be looking at false dawns every 5 minutes. Just when you think that the business community is gearing up for a boost in business we seem to get knocked back. My next door neighbour is a heating and plumbing engineer. His van was ALWAYS gone between 8am and 6pm. It now sits mostly on the drive.

People aren’t buying things. If they aren’t buying things we can’t finance them. So can I make a plea to all business owners to go out and start buying stuff?

Thanks!

sanity breaks out in government!

It is very good news that our new government is starting to strip away meaningless legislation that has been clogging up business for far too long. The announcement that “HIPS” are going is good news for most, except those that started new businesses on the back of this legislation.

One can only imagine how much UK PLC has wasted on this botched legislation, but now thankfully Labour are out we will stop billions being wasted.

I’m busy at the moment loading videos onto youtube giving hopefully good and sound business advice for small business owners regarding finances.

Decisions, Decisions!!!

Can I make a plea to UK PLC?  Please will someone make a decision?

As I write this on Monday 10 May 2010 we have a hung parliament and nobody seems to know what is happening to either the political life of this country, or more importantly, the business life!

As I make my living trying to get finance for businesses, lenders have been incredibly nervous about supporting any (as they would see it) non “blue chip” lend. It is incredibly frustrating not knowing whether I am going to get support. If I knew one way or the other I could either 1. go and drive a truck (if there are any hauliers left!) or 2. Have confidence in the finance industry.

Please can we at least have a decision from the politicians so that businesses have SOME idea of where the economy is going and have the confidence to invest.

Rant over!

Invoice Discounting & Factoring-no tie in!

Invoice discounting and factoring, whereby you “sell” your sales invoices to receive money tomorrow instead of 30 or 60 days is the marmite of the finance world.

Unfortunately many small businesses take on the facility when they are in need of funds quickly, and come to resent the finance house at some point in the future, when they perhaps do not need to “sell” the invoices for a discount. They come to resent giving away a percentage of every invoice.

There is now a new product on the market which totally avoids this situation. This enables businesses to “sell” an invoice of between £5,000 and £100,000 per debtor as a one off deal, without any tie in for the future. Clients do not have to enter into 6, 12 or even 18 month contracts.

I see this facility as being ideal for businesses who may have a “one off” large deal which they are not sure they can fund, but do not want to commit to “selling” all of their invoices.